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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
1-15015
-------------------------
(COMMISSION FILE NUMBER)
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
-------------------------
STARMEDIA NETWORK, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 06-1461770
(State or Other Jurisdiction of Incorporation) (I.R.S. Employer Identification
Number)
75 VARICK STREET, NEW YORK, NY 10013
(Address of Principal Executive Offices) (Zip Code)
(212) 905-8200
(Registrant's Telephone Number, Including Area Code)
-------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days: Yes [X] No[ ]
As of June 30, 2001, there were 70,411,071 shares of the Registrant's
Common Stock, $0.001 par value per share, outstanding.
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STARMEDIA NETWORK, INC. AND SUBSIDIARIES
INDEX
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PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets at June 30, 2001 (unaudited) and December 31, 2000 (audited) 1
Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June
30, 2001 and 2000................................................................................. 2
Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2001
and 2000.......................................................................................... 3
Notes to Unaudited Condensed Consolidated Financial Statements.................................... 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............. 9
Item 3. Quantitative and Qualitative Disclosure About Market Risk......................................... 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................................................. 17
Item 2. Changes In Securities and Use of Proceeds......................................................... 17
Item 3. Defaults upon Senior Securities................................................................... 18
Item 4. Submission of Matters to a Vote of Security Holders............................................... 18
Item 5. Other Information................................................................................. 19
Item 6. Exhibits and Reports on Form 8-K.................................................................. 19
</Table>
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PART I
FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
STARMEDIA NETWORK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
JUNE 30, 2001 DECEMBER 31, 2000
--------------------------------
(UNAUDITED) (AUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................................................ $ 59,223,000 $ 93,408,000
Accounts receivable, net of allowance for bad debts of $6,580,000 (2001)
and $1,959,000 (2000) ......................................................... 14,483,000 20,082,000
Unbilled receivables ............................................................. 6,797,000 6,131,000
Other current assets ............................................................. 16,642,000 7,680,000
------------- -------------
TOTAL CURRENT ASSETS ............................................................... 97,145,000 127,301,000
Fixed assets, net ................................................................ 54,075,000 55,569,000
Intangible assets, net of accumulated amortization of $ 2,353,000 (2001)
and $1,676,000 (2000) ......................................................... 4,944,000 5,557,000
Goodwill, net of accumulated amortization of $ 4,317,000 (2001)
and $2,435,000 (2000) ........................................................ 15,962,000 6,582,000
Officer loans .................................................................... 800,000 4,563,000
Other assets ..................................................................... 10,520,000 16,091,000
------------- -------------
TOTAL ASSETS ....................................................................... $ 183,446,000 $ 215,663,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ................................................................. $ 10,139,000 $ 20,737,000
Accrued expenses ................................................................. 22,609,000 15,226,000
Loan payable, current portion .................................................... -- 2,462,000
Deferred revenue ................................................................. 3,555,000 1,428,000
------------- -------------
TOTAL CURRENT LIABILITIES .......................................................... 36,303,000 39,853,000
Loan payable, long term portion .................................................. -- 1,902,000
Deferred rent .................................................................... 3,460,000 2,199,000
Preferred dividends payable ...................................................... 183,000 --
SERIES A CONVERTIBLE PREFERRED STOCK
Series A Convertible Preferred Stock, $.001 par value, 1,960,784 shares
authorized, 1,431,373 shares issued and outstanding at June 30, 2001) .......... 35,055,000 --
STOCKHOLDERS' EQUITY:
Preferred Stock, authorized 10,000,000 shares:
Series 1999A junior-non-voting convertible preferred stock, $.001 par value,
2,300,000 shares authorized, 58,140 shares outstanding at June 30, 2001 and
December 31, 2000, respectively ................................................ -- --
Common stock, $.001 par value, 200,000,000 shares authorized, 70,411,071 and
66,927,883 shares issued and outstanding at June 30, 2001 and December 31, 2000,
respectively ................................................................... 70,000 67,000
Common stock issuable ............................................................ 15,637,000 12,635,000
Additional paid-in-capital ....................................................... 527,861,000 516,311,000
Accumulated deficit .............................................................. (433,137,000) (353,867,000)
Deferred compensation ............................................................ (1,135,000) (2,636,000)
Other comprehensive loss ......................................................... (851,000) (801,000)
------------- -------------
Total stockholders' equity ......................................................... 108,445,000 171,709,000
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ......................................... $ 183,446,000 $ 215,663,000
============= =============
</Table>
See accompanying notes to financial statements.
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STARMEDIA NETWORK, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<Table>
<Caption>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
---------------------------- ------------------------------
2001 2000 2001 2000
------------ ------------ ------------- -------------
(UNAUDITED) (UNAUDITED)
Revenues ........................................................ $ 14,204,000 $ 13,764,000 $ 30,243,000 $ 23,820,000
Operating expenses:
Product and technology development ............................ 14,234,000 19,458,000 28,776,000 35,358,000
Sales and marketing ........................................... 15,626,000 22,274,000 35,290,000 40,861,000
General and administrative .................................... 7,472,000 7,702,000 15,146,000 15,777,000
Restructuring charges ......................................... 15,456,000 -- 15,456,000 --
Depreciation and amortization ................................. 7,100,000 7,289,000 12,839,000 11,833,000
Stock-based compensation expense .............................. 683,000 1,108,000 1,398,000 2,320,000
------------ ------------ ------------- -------------
Total operating expenses ...................................... 60,571,000 57,831,000 108,905,000 106,149,000
------------ ------------ ------------- -------------
Loss from operations ............................................ (46,367,000) (44,067,000) (78,662,000) (82,329,000)
Other income (expense):
Interest income ............................................... 920,000 3,330,000 2,295,000 6,793,000
Interest expense .............................................. (681,000) (364,000) (865,000) (684,000)
Loss in unconsolidated subsidiary ............................. (1,800,000) (2,500,000) (1,800,000) (2,500,000)
Other income / (expenses) ..................................... 90,000 (373,000) 55,000 (373,000)
------------ ------------ ------------- -------------
Loss before provision for income taxes .......................... (47,838,000) (43,974,000) (78,977,000) (79,093,000)
Provision for income taxes ...................................... -- (7,000) (87,000) (7,000)
------------ ------------ ------------- -------------
Net loss ........................................................ $(47,838,000) $(43,981,000) $ (79,064,000) $ (79,100,000)
Preferred stock dividends and accretion ......................... (206,000) -- (206,000) --
Net loss available to common stockholders ....................... $(48,044,000) $(43,981,000) $ (79,270,000) $ (79,100,000)
============ ============ ============= =============
Basic and diluted net loss per common share ..................... $ (0.69) $ (0.67) $ (1.15) $ (1.21)
============ ============ ============= =============
Number of shares used in computing basic and diluted net loss per
share ......................................................... 70,001,765 65,706,679 68,693,438 65,173,234
============ ============ ============= =============
</Table>
See accompanying notes to financial statements.
2
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STARMEDIA NETWORK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<Table>
<Caption>
FOR THE SIX MONTHS ENDED JUNE 30,
---------------------------------
2001 2000
------------ -------------
(UNAUDITED)
OPERATING ACTIVITIES
Net loss .................................................................. $(79,064,000) $ (79,100,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization ........................................... 12,839,000 11,833,000
Provision for bad debts ................................................. 12,793,000 225,000
Amortization of stock-based compensation ................................ 1,398,000 2,320,000
Writedown of officer loans .............................................. 10,397,000 --
Deferred rent expense ................................................... 1,261,000 2,151,000
Changes in operating assets and liabilities:
Accounts receivable ..................................................... (6,790,000) (4,194,000)
Unbilled receivables .................................................... (666,000) --
Other assets ............................................................ (5,837,000) (9,442,000)
Accounts payable and accrued expenses ................................... (2,476,000) 23,173,000
Deferred revenues ....................................................... 2,235,000 588,000
------------ -------------
Net cash (used in) operating activities ................................... (53,910,000) (52,446,000)
INVESTING ACTIVITIES
Purchase of fixed assets .................................................. (9,081,000) (32,244,000)
Intangible assets ......................................................... (150,000) (1,209,000)
Other assets .............................................................. 5,661,000 (13,213,000)
Officer loans ............................................................. (6,836,000) --
Cash paid for acquisitions ................................................ (2,133,000) (7,527,000)
------------ -------------
Net cash (used in) investing activities ................................... (12,539,000) (54,193,000)
FINANCING ACTIVITIES
Issuance of common stock .................................................. 204,000 3,139,000
Repayment of long-term debt ............................................... (4,364,000) (752,000)
Issuance of convertible preferred stock ................................... 36,500,000 --
Payments under capital leases ............................................. -- (58,000)
------------ -------------
Net cash provided by financing activities ................................. 32,340,000 2,329,000
Effect of exchange rate changes on cash and cash equivalents .............. (76,000) 99,000
------------ -------------
Net decrease in cash and cash equivalents ................................. (34,185,000) (104,211,000)
Cash and cash equivalents, beginning of period ............................ 93,408,000 274,089,000
------------ -------------
Cash and cash equivalents, end of period .................................. $ 59,223,000 $ 169,878,000
============ =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid ............................................................. $ 865,000 $ 674,000
============ =============
Income taxes paid ......................................................... $ 392,000 $ --
============ =============
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Acquisition of content through common stock to be issued .................. $ 3,000,000 $ --
============ =============
Shares issued/issuable for acquisitions ................................... $ 18,635,000 $ --
============ =============
Accrued purchases of fixed assets ......................................... $ 552,000 $ --
============ =============
</Table>
See accompanying notes to financial statements.
3
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STARMEDIA NETWORK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
The accompanying condensed consolidated financial statements include
the accounts of StarMedia Network, Inc. and its wholly-owned subsidiaries
(collectively, the "Company"). All intercompany account balances and
transactions have been eliminated in consolidation. StarMedia Network, Inc. was
incorporated under Delaware law in March 1996.
The Company is the leading integrated Internet media and solutions
company targeting Spanish- and Portuguese-speaking markets worldwide, providing
technology and services that enable consumers and businesses to take full
advantage of the Internet. The Company's network consists of interest-specific
channels, extensive Web-based community features, sophisticated search
capabilities and access to online shopping in Spanish and Portuguese. These
channels cover topics of interest to Spanish and Portuguese speakers online,
including local and regional news, business and sports. The Company promotes
user affinity to the StarMedia community by providing tools and services such as
Spanish- and Portuguese-language e-mail, chat rooms, instant messaging and
personal homepages. The Company also operates StarMedia Mobile, the leading
mobile Internet enabler for wireless carriers in Latin and South America.
Through partnerships and strategic alliances in the region, StarMedia Mobile
allows millions of users to access and receive Internet content through wireless
devices, such as pagers, cellular phones, PCS handsets, GSM handsets and
personal digital assistants, or PDAs.
The balance sheet at December 31, 2000 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by accounting principles generally accepted
in the United States to be complete financial statements. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the year ended
December 31, 2000.
Certain amounts in the prior year's financial statements have been
reclassified to conform to the current period's presentation.
2. BARTER TRANSACTIONS
A portion of the Company's revenues is derived from barter transactions
(agreements whereby the Company trades advertising on its network or services in
exchange for advertising or services from unrelated parties). Barter advertising
revenues and expenses are recognized in accordance with Emerging Issues Task
Force Issue No. 99-17, "Accounting for Barter Advertising". Barter service
revenues and expenses are recognized in accordance with Accounting Principles
Board Opinion No. 29, "Accounting for Nonmonetary Transactions". Revenues from
barter transactions are recognized during the period in which the advertisements
are displayed on the Company's network or the services are rendered. Barter
expense is recognized when the Company's advertisements are run or services are
rendered by the unrelated party. For the three months ended June 30, 2001 and
2000, revenues derived from barter transactions were approximately $3.6 million
and $1.9 million, respectively. For the six months
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ended June 30, 2001 and 2000, revenues derived from barter transactions were
approximately $7.0 million and $3.4 million, respectively.
3. FOREIGN CURRENCY AND INTERNATIONAL OPERATIONS
The functional currency of the Company's active subsidiaries in
Argentina, Brazil, Chile, Mexico, Spain and Colombia is the local currency. The
financial statements of these subsidiaries are translated to U.S. dollars using
period-end exchange rates for assets and liabilities, and average rates for the
period for revenues and expenses. Translation gains and losses are deferred and
accumulated as a component of stockholders' equity. The functional currency of
the Company's active subsidiary in Venezuela, which is a highly inflationary
economy, is the U.S. dollar. Accordingly, monetary assets and liabilities are
translated using the current exchange rate in effect at the period-end date,
while nonmonetary assets and liabilities are translated at historical rates.
Operations are generally translated at the weighted average exchange rate in
effect during the period. The resulting foreign exchange gains and losses are
recorded in the consolidated statements of operations.
4. STOCKHOLDERS' EQUITY
In February 2001, the Company issued 1,058,476 shares of its common
stock in connection with its settlement of a guarantee related to the Gratis 1
transaction described in Note 6 below, valued at approximately $4.5 million.
Also in February of 2001, the Company issued 8,035 shares of its common stock in
connection with its November 1999 acquisition of Paisas.com, valued at
approximately $139,000. In April 2001, in connection with its February 2000
acquisition of Ola Turista Ltda., the owner of Guia and Guia RJ, and its
September 1999 acquisition of PageCell International Holdings, Inc., the Company
issued 592,128 shares and 528,787 shares, valued at approximately $1.1 million
and $962,000, respectively.
In connection with its April 2000 acquisition of Adnet S.A. de C.V.
("Adnet"), the Company is obligated to pay additional consideration in the form
of StarMedia common stock over a five-year period from the acquisition date,
subject to Adnet meeting certain specified performance targets. Such earnouts
will be accrued as common stock issuable as the targets are met.
During the six months ended June 30, 2001, the Company issued 104,627
shares of its common stock for approximately $57,000 in connection with the
exercise of stock options. Additionally, the Company sold 66,135 shares of
common stock for approximately $147,000 in connection with its Employee Stock
Purchase Plan.
During the quarter ended June 30, 2001, the Company issued 1,431,373
shares of its Series A Convertible Preferred Stock at a price per share of
$25.50 to Bell South Enterprises, Inc. ("BellSouth") and certain other investors
resulting in total proceeds of approximately $35.1 million to the Company, net
of issuance costs of approximately $1.4 million (the "BellSouth Investment").
These shares are convertible into 14,313,730 shares of the Company's common
stock at any time at the option of the holder. After 60 months from the date of
issuance, the Company shall redeem the Series A Preferred Stock for cash or
shares of the Company's common stock, in an amount equal to $36.5 million, plus
accrued dividends thereon. The
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carrying value of the Series A Convertible Preferred Stock is being accreted up
to its redemption value over 60 months using the effective interest method. Such
accretion was $23,000 during the quarter ended June 30, 2001. Dividends accrued
at 6% per annum and totaled approximately $183,000 during the quarter ended June
30, 2001.
In addition, in connection with the BellSouth Strategic Agreement (see
Note 6), the Company agreed to issue warrants to BellSouth to purchase up to
4,500,000 shares of the Company's common stock, with exercise prices ranging
from $4.55 to $8.55 per share that vest in May 2002 and expire during the period
from May 2005 through May 2007. These warrants were valued, by an independent
appraiser, at approximately $2.2 million and will be amortized over 60 months.
5. STOCK OPTIONS
In connection with the granting of stock options in 1998 and the
exchange of non-qualified options to incentive stock options, the Company
recorded deferred compensation of approximately $19.1 million. In connection
with the granting of stock options in 1999, the Company recorded additional
deferred compensation of approximately $6.2 million. Deferred compensation is
adjusted quarterly for exercises, cancellations and terminations and is being
amortized for financial reporting purposes over the vesting period of the
options. The amounts recognized as expense during the six-month period ended
June 30, 2001 and June 30, 2000 were approximately $1.4 million and $2.3
million, respectively.
Diluted net loss per share does not include the effect of options to
purchase 20,548,000 and 16,072,000 shares of common stock at June 30, 2001 and
2000, respectively.
6. RELATED PARTY TRANSACTIONS
GRATIS1
During 2000, the Company acquired a non-controlling 50% interest in
Gratis1 ("G1"), which was subsequently reduced to approximately 48%. G1 was
formed to provide free unlimited Internet access to users in Latin America. The
owners of G1 also included Chase Equity Associates, The Flatiron Fund 2000 LLC,
the Flatiron Associates II LLC, who are significant shareholders of the Company,
and CMGI among others. The Company accounted for its investment in G1 under the
equity method of accounting and during the second quarter of 2000, the Company's
share of equity losses in G1 exceeded its investment basis of $2.5 million and
the investment was written-off.
Chase Equity Associates, The Flatiron Fund 2000 LLC and the Flatiron
Associates II LLC (the "Lenders") purchased debt securities from G1 in an
aggregate amount of $17.3 million. Approximately $10.3 million of such
securities were backed by a limited guaranty by the Company, payable in its
common stock. In January 2001, G1 ceased operations and in February 2001, the
Company issued to the Lenders 1,058,476 shares of its common stock with a market
value of approximately $4.5 million pursuant to the guaranty of approximately
$7.0 million of such securities. In connection with the remaining $3.3 million
guaranty, the Company will issue 1,148,000 shares of additional common stock
valued at $3.00 per share in full settlement of the guaranty. At June 30, 2001,
such amount is included in common stock
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issuable. With respect to the $7.0 million of such debt securities which were
not subject to such limited guaranty, in the event of a change of control of
the Company, the Lenders would have the right to put (and the Company would
have a corresponding right to call) such securities to the Company for shares
of its common stock or merger consideration, as the case may be, at their
fair market value for the face amount of such debt securities plus a 25%
annualized return.
On May 30, 2001, the Company entered into an agreement with BellSouth
to create multi-access portals in Latin America (the "BellSouth Strategic
Agreement"). Under the terms of the five-year agreement, the Company will design
and service the multi-access portals and mobile applications and provide
content, software application integration and support to BellSouth's operating
companies in Latin America. BellSouth will supply wireless communications,
marketing of services and billing capabilities. The two companies will share
revenues generated by the new multi-access portals. All revenues associated with
design and maintenance activities and the technology licenses will be recognized
ratably over the life of the agreement, while the user fees and transaction
revenues will be recognized when the services are rendered. For the three months
ended June 30, 2001, there was no revenue derived from the BellSouth Strategic
Agreement.
During the quarter ended June 30, 2001, the Company entered into a
five-year agreement with About.com, Inc. ("About.com") to create a jointly
operated co-branded website, within the About.com website. About.com granted
the Company certain worldwide license rights to use its content and
proprietary technology in exchange for $2 million in cash and $3 million in
shares of the Company's common stock. At June 30, 2001, such shares are
included in common stock issuable. The aggregate purchase price of $5 million
has been accounted for as a prepaid expense, consisting of $3 million of
content acquisition expenses, which will be expensed on a straight-line basis
over the delivery period of four and a half years, $800,000 of advertising
expenses, which will be expensed as services are rendered, $700,000 of
maintenance expenses, which will be expensed on a straight-line basis over
the life of the agreement and $500,000 of capital expenditures, which will be
depreciated over an estimated useful life of five years.
During the quarter ended September 30, 2000, an agreement between the
Company and AT&T Global Network Services ("AT&T") to provide Internet access
services in Argentina, Brazil, Chile, Colombia and Mexico was assigned to G1.
AT&T was entitled to draw upon a $1.8 million letter of credit, guaranteed by
StarMedia, in the event G1 failed to perform under this agreement. At June 30,
2001, AT&T drew down $1.4 million of the letter of credit, the balance of which
was drawn upon in July 2001. Accordingly, during the quarter ended June 30,
2001, the Company recognized an expense of $1.8 million related to the guaranty.
7. DUE FROM OFFICERS
During the year ended December 31, 2000, the Company provided lines of
credit to certain officers totaling $6.4 million, under which $4.6 million was
advanced to such officers. Such lines are non-recourse and bear interest at
rates ranging from 6.75% to 10.0% per annum. In January 2001, the lines of
credit available to the Company's officers were increased to $12.4 million. As
of June 30, 2001, the Company had made loans to officers under such lines of
credit totaling approximately $11.0 million. These loans are secured by shares
of the Company's common stock held by its officers to the extent permitted by
Regulation U under the Securities
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Exchange Act of 1934, as amended. In addition, during the year ended December
31, 2000, the Company made an unsecured, recourse loan totaling $500,000 to
its Chief Operating Officer. As a result of the termination of the Company's
Chief Operating Officer and management's determination that the remaining
loans were unrealizable due to a reduction in value of the supporting
collateral, the Company reserved approximately $10.8 million against these
loans and related interest, which amount is included in restructuring charges
(see Note 9) for the period ended June 30, 2001. The portion reserved
represents the anticipated unrealizable value of these loans.
8. COMPREHENSIVE LOSS
Total comprehensive loss was approximately $47.7 million and $79.1
million for the three and six month periods ended June 30, 2001, respectively
and approximately $44.5 million and $79.4 million for the three and six month
periods ended June 30, 2000, respectively.
9. RESTRUCTURING CHARGES
In May 2001, the Company announced a restructuring, the purpose of
which was to realign the Company's business operations and reduce its
operational overhead. In connection with such restructuring, the Company
recorded aggregate charges of approximately $15.5 million, including
approximately $10.8 million of loans and related interest to officers (see
Note 7) that were reserved, approximately $3.4 million of severance payments
to employees and certain officers of the Company and approximately $1.2
million of other related costs.
10. NEW ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No.
141 requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001. SFAS No. 142 changes the accounting
for goodwill from an amortization method to an investment-only approach. Thus,
amortization of goodwill recorded in past combinations will cease upon adoption
of SFAS No. 142, which is effective for the Company on January 1, 2002. The
Company has not evaluated the effect, if any, that the adoption of SFAS No. 142
will have on the Company's consolidated financial statements.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR
FINANCIAL STATEMENTS AND THE NOTES TO THOSE STATEMENTS AND OTHER FINANCIAL
INFORMATION APPEARING ELSEWHERE IN THIS REPORT.
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS RELATING TO FUTURE
EVENTS AND FUTURE PERFORMANCE OF THE COMPANY WITHIN THE MEANING OF SECTION 27A
OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF
1934, INCLUDING, WITHOUT LIMITATION, STATEMENTS REGARDING THE COMPANY'S
EXPECTATIONS, BELIEFS, INTENTIONS OR FUTURE STRATEGIES THAT ARE SIGNIFIED BY THE
WORDS "EXPECTS," "ANTICIPATES," "INTENDS," "BELIEVES" OR SIMILAR LANGUAGE.
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN SUCH
FORWARD-LOOKING STATEMENTS. ALL FORWARD-LOOKING STATEMENTS INCLUDED IN THIS
DOCUMENT ARE BASED ON INFORMATION AVAILABLE TO THE COMPANY ON THE DATE HEREOF,
AND THE COMPANY ASSUMES NO OBLIGATION TO UPDATE ANY FORWARD LOOKING STATEMENTS.
THE COMPANY CAUTIONS INVESTORS THAT ITS BUSINESS AND FINANCIAL PERFORMANCE ARE
SUBJECT TO SUBSTANTIAL RISKS AND UNCERTAINTIES. IN EVALUATING THE COMPANY'S
BUSINESS, PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE INFORMATION SET
FORTH IN OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2000
UNDER THE CAPTION "RISK FACTORS" IN ADDITION TO THE OTHER INFORMATION SET FORTH
HEREIN.
OVERVIEW
StarMedia Network, Inc. was incorporated in Delaware in March 1996. We
commenced operations in September 1996 and launched the StarMedia network in
December 1996. In May 1999, we completed the initial public offering of our
common stock and in October 1999 we completed a follow-on public offering of our
common stock. Our principal executive offices are located at 75 Varick Street,
New York, New York 10013 and our telephone number is (212) 905-8200.
StarMedia Network is the leading integrated Internet media and
solutions company targeting Spanish- and Portuguese-speaking markets worldwide
providing technology and services that enable consumers and businesses to take
full advantage of the Internet. Our network consists of 14 branded Internet
properties:
o STARMEDIA (www.starmedia.com), a leading portal for Spanish
and Portuguese speakers, providing technology and services
that enable consumers and businesses to take full advantage of
the Internet;
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o LATINRED (www.latinred.net), one of the largest Spanish
language online communities;
o CADE? (www.cade.com.br), a premiere online directory in
Brazil;
o ZEEK! (www.zeek.com.br), a major online directory of
Portuguese language sites;
o ADNET (www.adnet.com.mx), Mexico's largest Web directory;
o OPENCHILE (www.openchile.cl), a comprehensive Chilean
directory and guide;
o BATEPAPO (www.batepapo.com.br), one of Brazil's leading chat
portals;
o GUIA SP (www.guiasp.com.br), GUIA RJ (www.guiarj.com.br) and
GUIA NACIDADE (www.nacidade.com), Brazil's largest
metropolitan Web directories;
o PANORAMAS (www.panoramas.cl), a leading Chilean guide for
Santiago;
o PAISAS.COM (www.paisas.com) and YOINVITO (www.yoinvito.com),
leading online Colombian city guides; and
o PERISCOPIO (www.periscopio.com), a powerful information portal
for Spanish speakers worldwide.
The Company also operates StarMedia Mobile, the leading mobile
Internet enabler for wireless carriers in Latin and South America. Through
partnerships and strategic alliances in the region, StarMedia Mobile allows
millions of users to access and receive Internet content through wireless
devices, such as pagers, cellular phones, PCS handsets, GSM handsets and
personal digital assistants, or PDAs.
Through these properties, we offer our users a variety of in-language
interest-specific areas or channels, extensive Web-based community features,
sophisticated search capabilities and online shopping. Our content covers a
broad array of topics of interest to Spanish- and Portuguese-speaking audiences,
including local and regional news, business and sports. We promote user affinity
to the StarMedia community by providing tools and services such as Spanish- and
Portuguese- language e-mail, chat rooms, instant messaging and personal
homepages. We provide our content and community features to our users free of
charge.
At a time when content on the Internet is overwhelmingly in English, we
offer our users an in-language community experience, combined with a broad array
of Spanish and Portuguese content, tailored for regional dialects and local
cultural norms. As a result, we provide advertisers and merchants targeted
access to Spanish- and Portuguese-speaking Internet users, an audience with a
highly desirable demographic profile.
Despite the rapid growth of non-English speaking Internet users
worldwide, approximately 80 to 85% of the content on the Internet remains in
English. Combined, Spanish- and Portuguese-language sites comprise less than 5%
of the total. We believe that an increasing number of Spanish- and
Portuguese-speaking Internet users are seeking a full-service Internet offering
in their local language that provides them with:
o a social interactive experience across the entire Spanish- and
Portuguese-speaking world;
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o a variety of in-depth and focused local content;
o a broad array of compelling content at the regional and
international level;
o sophisticated Internet applications and tools like e-mail,
chat, instant messaging, bulletin boards, personal homepages
and search capabilities; and
o the ability to easily and securely buy goods and services
online.
StarMedia was among the first sites tailored specifically to the
interests and needs of Spanish and Portuguese speakers. In so doing, we were
also among the first to attract a broad user base and to provide advertisers
with an attractive platform to effectively reach this highly desirable
Spanish-and Portuguese-speaking Internet user base.
During April 2001, the Company entered into an agreement to acquire
certain assets of Obsidiana, Inc., a premier on-line destination for Latin
American women, in exchange for 1,125,000 shares of the Company's common stock.
The assets to be acquired include Obsidiana's content library, its key
trademarks and domain names, and certain fixed assets located in the United
States, Mexico and Argentina. The stockholders of Obsidiana include J.P. Morgan
Partners (BNCA), LP and The Flatiron Fund 2000 LLC, who are significant
shareholders of the Company.
On May 30, 2001, the Company entered into the BellSouth Strategic
Agreement to create multi-access portals in Latin America. The partnership is
expected to result in co-branded multi-access portals enabling the approximately
12 million cellular customers of BellSouth's Latin American affiliates to access
personalized information from any location via their personal computers or
cellular phones. The mobile service will include WAP, SMS, text and voice access
with text to speech and voice recognition technology. The fully integrated
portals will also provide a premium content distribution and advertising
platform for advertisers to reach their consumers. Under the terms of the
five-year agreement, StarMedia will provide multi-access portals, mobile
applications, content, and application integration to BellSouth's operating
companies in Latin America. BellSouth will supply wireless communications,
marketing of services, and billing capabilities. The two companies will share
revenues generated by the new multi-access portals.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2001 AND JUNE 30, 2000
REVENUES
Total revenues increased to $14.2 million for the three months ended
June 30, 2001 from $13.8 million, for the three months ended June 30, 2000. This
increase was primarily associated with greater advertising and sponsorship
revenues. Barter revenues for the three months ended June 30, 2001 and 2000 were
25% and 14%, respectively.
For the three months ended June 30, 2001 and June 30, 2000, no single
advertiser accounted for more than 10% of our total revenues. For the three
months ended June 30, 2001, our
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top five advertisers accounted for 30% of our total revenues. For the three
months ended June 30, 2000, our top five advertisers account for 23% of our
total revenues.
OPERATING EXPENSES
PRODUCT AND TECHNOLOGY
Product and technology expenses decreased to $14.2 million, or 100% of
total revenues, for the three months ended June 30, 2001, from $19.5 million, or
141% of total revenues, for the three months ended June 30, 2000. This decline
was primarily due to decreases of approximately $3.0 million in salaries
associated with one-time payments as part of the acquisition of Cade, the
Brazilian online directory, $900,000 in expenses related to content acquisition
and $700,000 for hosting costs.
SALES AND MARKETING
Sales and marketing expenses decreased to $15.6 million, or 110% of
total revenues for the three months ended June 30, 2001 from $22.3 million, or
162% of total revenues, for the three months ended June 30, 2000. This decrease
was primarily due to decreases in advertising and trade events of $9.9 million
and salary and commissions of $1.1 million, partially offset by an increase in
bad debt expense of $6.4 million. We believe the Company has ample coverage for
bad debt and will continue to review the collectibility of our receivables.
GENERAL AND ADMINISTRATIVE
General and administrative expenses decreased to $7.5 million, or 53%
of total revenues, for the three months ended June 30, 2001, from $7.7 million,
or 56% of total revenues, for the three months ended June 30, 2000. This
decrease is primarily the result of a decrease in legal, tax and recruiting
fees.
RESTRUCTURING CHARGES
For the three months ended June 30, 2001, we recorded restructuring
charges totaling approximately $15.5 million, which was the result of a
company-wide realignment of its business operations and an effort to reduce
its operational overhead and included the reserving of approximately $10.8
million of loans and related interest made to certain officers of the
Company, determined by management to be unrealizable due to the impairment in
collateral value.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expenses decreased slightly to $7.1
million, or 50% of total revenues, for the three months ended June 30, 2001,
from $7.3 million, or 53% of total revenues, for the three months ended June 30,
2000. This decrease is due to the net effect of an increase in depreciation
expense due to additional capital purchases offset by a decrease of goodwill
amortization due to an write-down of goodwill in December 2000. Even though
depreciation and amortization expenses decreased slightly, we expect that
depreciation expenses will increase as additional capital purchases are incurred
during 2001.
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STOCK BASED COMPENSATION EXPENSE
Of the cumulative deferred compensation amount, $683,000 was recorded
as an expense for the three months ended June 30, 2001 compared with $1.1
million recorded as expense for the three months ended June 30, 2000. The
unamortized balance is being amortized over the vesting period for the
individual options, which is typically three years for options issued prior to
February 1999 and four years for options issued thereafter.
INTEREST
Interest income includes income from our cash and investments. Interest
income decreased to $920,000 for the three months ended June 30, 2001 from $3.3
million for the three months ended June 30, 2000. Interest income decreased as a
result of a decrease in the average invested cash balance for the above periods.
Interest expense is comprised primarily of interest related to an
equipment lease line which was paid in full during the quarter ended June 30,
2001. Interest expense increased to $684,000 for the three months ended June 30,
2001 from $364,000 for the three months ended June 30, 2000. This increase is
due to additional borrowings by the Company during December 2000.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND JUNE 30, 2000
REVENUES
Total revenues increased to $30.2 million for the six months ended June
30, 2001 from $23.8 million, for the six months ended June 30, 2000. This
increase in revenues was primarily due to an increase in the volume of
revenue-producing advertising impressions and sponsorships. Barter revenues for
the six months ended June 30, 2001 and 2000 were 23% and 14%, respectively.
For the six months ended June 30, 2001, no single advertiser accounted
for more than 10% of our total revenues. For the six months ended June 30, 2000,
one single advertiser accounted for more than 10% of our total revenues. For the
six months ended June 30, 2001, our top five advertisers accounted for 21% of
our total revenues. For the six months ended June 30, 2000, our top five
advertisers account for 24% of our total revenues.
OPERATING EXPENSES
PRODUCT AND TECHNOLOGY
Product and technology expenses decreased to $28.8 million, or 95% of
total revenues, for the six months ended June 30, 2001, from $35.4 million, or
148% of total revenues, for the six months ended June 30, 2000. This decrease
was primarily due to decreases of approximately $1.6 million expenses related to
content acquisition, $1.5 million in hosting related expenses, and $2.0 million
in salaries associated with one-time payments as part of the acquisition of
Cade, the Brazilian online directory.
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SALES AND MARKETING
Sales and marketing expenses decreased to $ 35.3 million, or 117% of
total revenues, for the six months ended June 30, 2001 from $40.9 million, or
172% of total revenues, for the six months ended June 30, 2001. This decrease
was primarily due to the net effect of decreases in advertising, salaries, trade
show events, consulting and travel, totaling approximately $15.5 million,
partially offset by an increase in bad debt expense of $12.8 million. We believe
the Company has ample coverage for bad debt and will continue to review the
collectibility of our receivables.
GENERAL AND ADMINISTRATIVE
General and administrative expenses decreased to $15.1 million, or 50%
of total revenues, for the six months ended June 30, 2001, from $15.8 million,
or 66% of total revenues, for the six months ended June 30, 2000. The decrease
in general and administrative expenses was primarily due to decreases in legal,
tax and audit fees, recruiting and office rent, partially offset by increase in
salaries.
RESTRUCTURING CHARGES
For the six months ended June 30, 2001, we recorded restructuring
charges totaling approximately $15.5 million, which was the result of a
company-wide realignment of its business operations and an effort to reduce
its operational overhead and included the reserving of approximately $10.8
million of loans and related interest made to certain officers of the
Company, determined by management to be unrealizable due to the impairment in
collateral value.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expenses increased to $12.8 million, or
42% of total revenues, for the six months ended June 30, 2001, from $11.8
million, or 50% of total revenues, for the six months ended June 30, 2000. This
increase is due to the net effect of an increase in depreciation expense due to
additional capital purchases offset by a decrease of goodwill amortization due
to an write-down of goodwill in December 2000. We expect that depreciation
expenses will continue to increase as additional capital purchases are incurred
during 2001.
STOCK-BASED COMPENSATION EXPENSE
Of the cumulative deferred compensation amount, $1.4 million was
recorded as an expense for the six months ended June 30, 2001 compared with $2.3
million recorded as expense for the six months ended June 30, 2000. The
unamortized balance is being amortized over the vesting period for the
individual options, which is typically three years for options issued prior to
February 1999 and four years for options issued thereafter.
INTEREST
Interest income includes income from our cash and investments. Interest
income decreased to $2.3 million for the six months ended June 30, 2001 from
$6.8 million for the six
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months ended June 30, 2000. Interest income decreased as a result of a decrease
in the average invested cash balance for the above periods.
Interest expense is comprised primarily of interest related to an
equipment lease line which was paid in full during the quarter ended June 30,
2001. Interest expense increased to $865,000 for the six months ended June 30,
2001 from $684,000 for the three months ended June 30, 2000. This increase is
due to additional borrowings by the Company during December 2000.
LIQUIDITY AND CAPITAL RESOURCES
To date, we have financed our operations primarily through the sale of
our equity securities. At June 30, 2001, we had $59.2 million in cash and cash
equivalents, a decrease of $34.2 million from December 31, 2000.
For the six months ended June 30, 2001, we used $53.9 million in
operating activities, substantially related to our $79.1 million loss during the
period, which included non-cash activities such as $12.8 million for
depreciation and amortization, $12.8 million in provision for bad debts and $1.4
million for amortization of stock based compensation. In addition, for the six
months ended June 30, 2001, we used $12.5 million in investing activities,
including $9.1 million for fixed assets.
Net cash provided by financing activities were $32.3 million and $ 2.3
million for the six months ended June 30, 2001 and 2000, respectively. Net cash
provided by financing activities during the six months ended June 30, 2001
consisted primarily of proceeds of $36.5 million resulting from the issuance of
the Company's Series A Convertible Preferred Stock, partially offset by $4.4
million used for the repayment of long-term debt. Net cash provided by financing
activities during the six months ended June 30, 2000 consisted primarily of
proceeds of $3.1 million resulting from the issuance of the Company's common
stock, partially offset by $800,000 used for the repayment of long-term debt.
During the quarter ended June 30, 2001, the Company issued 1,431,373
shares of its Series A Convertible Preferred Stock at a price per share of
$25.50 to BellSouth and certain other investors resulting in total proceeds of
$35.1 million to the Company, net of issuance costs of approximately $1.4
million. The shares are convertible into 14,313,730 shares of the Company's
common stock at any time at the option of the holder. After 60 months from the
date of issuance, the Company shall redeem the Series A Convertible Preferred
Stock for cash or shares of the Company's common stock, in an amount equal to
$36.5 million, plus accrued dividends thereon. Dividends accrued at 6% per annum
and totaled $182,500 during the quarter ended June 30, 2001. The carrying value
of the Series A Convertible Preferred Stock is being accreted up to its
redemption value over 60 months using the effective interest method. Such
accretion was $23,000 during the quarter ended June 30, 2001. In addition, in
connection with the BellSouth Strategic Agreement, the Company agreed to issue
warrants to BellSouth to purchase up to 4,500,000 shares of the Company's common
stock, with exercise prices ranging from $4.55 to $8.55 per share that vest in
May 2002 and expire during the period from May 2005 through May 2007. These
warrants were valued, by an independent appraiser, at approximately $2.2 million
and are being amortized over 60 months.
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During the quarter ended June 30, 2001, we used $4.4 million for
repayment of our long-term debt. As a result, at June 30, 2001, we had no
long-term debt outstanding.
Our principal commitments consist of obligations outstanding under
capital and operating leases.
We have experienced a substantial increase in our capital expenditures
and operating lease arrangements since our inception consistent with the growth
in our operations and staffing. We will continue to evaluate possible
investments in businesses, products and technologies.
Despite the proceeds from the financing transaction described above and
our steps to reduce operating expenses significantly through a reduction of our
work force and other operating costs, our current cash and cash equivalents may
not be sufficient to meet our anticipated cash needs for working capital and
capital expenditures for the next 12 months. If working capital is insufficient
to satisfy our liquidity requirements, we will seek to sell additional equity or
debt securities or establish a credit facility. The sale of additional equity or
convertible debt securities could result in additional dilution to our
stockholders. The incurrence of additional indebtedness would result in
increased fixed obligations and could result in operating covenants that would
restrict our operations. We cannot assure you that financing will be available
in amounts or on terms acceptable to us, if at all.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
MARKET RISK
Our accounts receivable are subject, in the normal course of business,
to collection risks. We regularly assess these risks and have established
policies and business practices to protect against the adverse effects of
collection risks.
INTEREST RATE RISK
Our investments are classified as cash and cash equivalents with
original maturities of three months or less. Therefore, changes in the market's
interest rates do not affect the value of the investments as recorded by us.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In December 2000, a consulting company filed suit against the Company
claiming unpaid fees of approximately $2,322,000. The Company has denied all
material allegations since, among other things, the services were rendered to an
unfunded subsidiary and the consulting company was notified that the Company
would not be liable for such fees. Management believes that the above matter
will be resolved without any material adverse impact to the Company's financial
position, results of operations or cash flows.
The Company is subject to legal proceedings and claims in the ordinary
course of business from time to time, including claims of alleged infringement
of trademarks, copyrights and other intellectual property rights, and a variety
of claims arising in connection with our e-mail, message boards and other
communications and community features, such as claims alleging defamation and
invasion of privacy. At this time, in the opinion of management, there are no
pending claims, including the above-mentioned lawsuit, the outcome of which is
expected to result in a material adverse effect or the consolidated financial
position or results of operations of the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
PREFERRED STOCK
On May 30, 2001, the Company sold 1,431,373 shares of its Series A
Convertible Preferred Stock, par value $0.001 per share, (the "Series A
Preferred Stock") to Bell South and certain other investors, at a price per
share of $25.50. These shares of Series A Preferred Stock are convertible into
14,313,730 shares (subject to adjustment) of the Company's common stock, par
value $0.001 per share, at any time at the option of the holder. After 60 months
from May 30, 2001, the Company shall redeem the Series A Preferred Stock for
cash or shares of the Company's stock, in an amount equal to $36.5 million.
Dividends accrue on the Series A Preferred Stock at a rate of 6% per annum.
Pursuant to the terms of the Series A Preferred Stock, the Company may not,
without the affirmative vote or written consent of at least a majority of all
outstanding shares of Series A Preferred Stock, voting or consenting separately
as a class, consummate a transaction constituting a change in control unless
prior to such consummation the Company has made arrangements that ensure the
payment to each holder of Series A Preferred Stock of an amount per share equal
to $25.50, subject to adjustment in the event of stock splits, subdivisions or
combination or reclassifications, plus all accrued but unpaid dividends. In
connection with the transaction described above, the Company issued to BellSouth
Enterprises, Inc. warrants to purchase up to 4,500,000 shares of the Company's
common stock, divided into three tranches, at a exercise prices ranging from
$4.55 to $8.55 per share.
We believe that the issuance of the Company's Series A Preferred Stock
described above is exempt from the registration requirements of the Securities
Act pursuant to Section 4(2) thereof or Regulation D promulgated thereunder.
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COMMON STOCK
In April 2001, in connection with its February 2000 acquisition of Ola
Turista Ltda., the owner of Guia and Guia RJ, and its September 1999 acquisition
of PageCell International Holdings, Inc., the Company issued 592,128 shares and
528,787 shares, valued at approximately $1.1 million and $962,000, respectively.
We believe that the issuances of the Company's common stock described
above are exempt from the registration requirements of the Securities Act
pursuant to Section 4(2) thereof or Regulation D promulgated thereunder.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of StarMedia was held on June 8,
2001. The following items were presented to the Stockholders with the following
results:
1. The following directors were elected to serve a three year term of
office to expire at the annual meeting in 2004 or until their successors have
been elected and qualified:
<Table>
<Caption>
DIRECTORS VOTES FOR VOTES AGAINST ABSTENTIONS BROKER NON-VOTES
- --------- --------- ------------- ----------- ----------------
Marie-Josee Kravis 49,068,235 170,167 -- --
Frederick R. Wilson 49,008,068 230,334 -- --
</Table>
Immediately following the meeting, the directors of StarMedia consisted
of the following individuals:
Fernando J. Espuelas
Jack C. Chen
Douglas M. Karp
Susan L. Segal
Gerardo M. Rosenkranz
Marie-Josee Kravis
Frederick R. Wilson
Mr. Rosenkranz subsequently resigned from the Board of Directors of
StarMedia on July 25, 2001. Mr. Enrique Narciso, the Company's President and
Chief Executive Officer, was appointed as Mr. Rosenkranz's successor and will
serve out the remainder of his term, ending at the Company's Annual Meeting in
2002.
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2. The stockholders approved the re-appointment of Ernst & Young LLP as
independent auditors of StarMedia for the 2001 fiscal year.
<Table>
<Caption>
VOTES FOR VOTES AGAINST ABSTENTIONS BROKER NON-VOTES
--------- ------------- ----------- ----------------
49,094,858 170,167 -- --
</Table>
ITEM 5. OTHER INFORMATION
On June 1, 2001, Jack C. Chen stepped down as president of the Company.
On August 7, 2001, Fernando J. Espuelas stepped down as Chief Executive Officer
of the Company. Mr. Enrique Narciso, was appointed to the positions of President
and Chief Executive Officer of the Company, on June 1, 2001 and August 7, 2001,
respectively. Mr. Chen remains a member of the Company's Board of Directors. Mr.
Espuelas remains Chairman of the Company's Board of Directors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed with this report (numbered in
accordance with Item 601 of Regulation S-K):
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
4.1 Amendment No. 1 to Rights Agreement, dated as of May 28, 2001, between
StarMedia Network, Inc. and American Stock Transfer & Trust Company.
10.1 Securities Purchase Agreement, dated as of May 30, 2001, between
StarMedia Network, Inc., BellSouth Enterprises, Inc. and the additional
investors set forth on Schedule A thereto.
10.2 Internet Content and Services Framework Agreement, dated as of May 30,
2001, by and between StarMedia Network, Inc. and BellSouth Enterprises,
Inc.*
- ----------
* The Company has requested confidential treatment for certain portions
of this exhibit pursuant to Rule 24b-2 promulgated under the Securities
Exchange Act of 1934, as amended. The portions of the exhibit that are
subject to this confidential treatment request have been omitted and
have been filed separately with the Securities and Exchange Commission.
(b) Reports on Form 8-K:
None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 14, 2001
STARMEDIA NETWORK, INC.
By: /s/ STEVEN J. HELLER
----------------------------------------
Steven J. Heller
CHIEF FINANCIAL OFFICER (DULY AUTHORIZED
OFFICER AND PRINCIPAL FINANCIAL OFFICER)
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